Shri Sakarlal Chhaganlal Reshamwala,HUF, Surat V. The ACIT.,Circle-7, Surat

ITA 3228/AHD/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5624 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 02-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDAN SRDR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Cost of acquisition; Fair market value; Valuation report; Deemed dividend; Capital receipt; Capital Gains
• Section: 50C; 41(2); 131; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.3228/AHD/2009 ASSESSMENT YEAR:2006-07 DATE OF HEARING:19.7.10 DRAFTED:19.7.10 SAKARLAL CHHAGANLAL RESHAMWALA,HUF 7/2369, RAAMPURAA MAIN ROAD, SURAT PAN NO.AAPHS5059C V/S . ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-7, SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI MANISH J SHAH, AR RESPONDENT BY:- SHRI K. MADHUSUDAN, SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDE R OF COMMISSIONER OF INCOME-TAX (APPEALS)-IV, SURAT IN APPEAL NO.CAS-IV/ 139/2008-09 DATED 09-10-2009. THE ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-7, SURAT U/S.143(3) OF THE INCOME-TAX, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE ASSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED BY THE ASSESSEE, WHICH READS AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) WAS NOT JUSTIFIED IN DETERMINING THE VALUE OF THE LAND AS ON 01-04-1981 AT RS.22,17,500 (88,700 SQ. MT. * RS.25) INSTEAD OF RS.53,22,000 (88,700 SQ . MT.* RS.60) VALUED AS PER APPROVED VALUERS VALUATION REPORT. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT CORRECT IN DETERMINING THE SALE PRICE OF LAND AT RS.5,000 PER SQ. MTR. INSTEAD OF JANTRY PRICE AT RS.400 PER SQ. MTR. AND SALE DEED WAS EXEC UTED AT RS.483=35P PER SQ. MTR. AND THEREBY MAKING ADDITION OF RS.3,69,83, 531. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT CORRECT IN MAKING INTERPRETATION OF LAW I.E. NEW SECTION 50C, A SPECIAL PROVISION OF DETERMINATION OF FULL VALUE OF CONSIDERATION IN CER TAIN CASES OF TRANSFER OF IMMOVABLE PROPERTY. ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 2 4. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) ENHANCING THE ASSESSMENT OF THE ASSESSEE IS NOT VALID BECAUSE SALE CONSIDERATION STATED IN THE SALE DEED HAVING BEEN ACCEPTED B THE STAMP VALUATION AUTHORITY FOR PURPOSES OF REGISTRATION, THERE IS NO QUESTION OF REPLACING VALUE ADOPTED BY STAMP VALUATION AUTHORITY. THE RELIANCE IS PLACED O N THE DECISION OF THE INCOME TAX APPELLATE TRIBUNAL, AMRISAR BENCH IN THE CASE OF PUNJAB POLLY JUTE CORPORATION VS. ASSISTANT COMMISSIONER OF INCOME-TA X (2009) 120 TTJ (ASR)1113. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT CORRECT IN CONFIRMING THE INDEX COST OF ACQUISITION. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN ADJUDICATING PROPERLY THE FACTS THE THERE ARE 14 FOURTEEN CO-OWNERS OF THE SAID LAND AND THEY HAD/HAVE NO BANK ACCOUNT FOR THE SAID LAND. IT WAS MORE CONVENIENT TO DISTRIBUTE CASH AS AND WHEN SALE PROC EEDS COMES FROM VENDEE. 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS SNOT JUSTIFIED IN CONTENDING THAT AN AGREEMENT TO SALE WITH POSSESSIO NS RECEIPT DATED 31-03- 2006 WAS UNREGISTERED. BUT, THEREAFTER, SALE DEED W AS EXECUTED ON 02-02- 2007, AND THE STAMP VALUATION AUTHORITY ACCEPTED TH E STATED SALE CONSIDERATION, REGISTERED THE DOCUMENTS FOR THE PUR POSE OF REGISTRATION, HENCE THE VALUE ADOPTED BY STAMP VALUATION AUTHORITY SHOU LD BE ACCEPTED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSEE ALONG WITH OTHER SIX FAMILY MEMBERS OWNED AN ANCESTRAL AGRICUL TURAL LAND AT SURVEY NO.227 BHESTAN, SURAT AD MEASURING 88700 SQ. MT. AGRICULTU RAL LAND FALLING UNDER SURAT URBAN DEVELOPMENT AUTHORITY (SUDA IN SHORT), WHEREB Y THE LAND AD MEASURING 6610 SQ. MT. WAS ACQUIRED AND THE BALANCE LAND OF 62090 SQ. MT. WAS LEFT WITH 14 CO- OWNERS OF RASHAMWALA FAMILY AND THE ABOVE SAID CO-O WNERS AGREED TO SELL THE SAID AGRICULTURAL LAND AD MEASURING 62090 SQ. MT. TO SHR I HITENDRA D PATEL IN APRIL 05. DURING THE YEAR UNDER CONSIDERATION SURVEY WAS COND UCTED ON 08-03-2006 ON THE BUSINESS PREMISES OF M/S. NAVJIVAN SYNTHETICS U/S.1 33A OF THE ACT, WHEREIN A WRITING PAD CONTAINING 8 PAGES WAS FOUND AND IMPOUNDED BY T HE DEPARTMENT AS ANNEXURE- BF/9. ON THIS WRITING PAD THE FOLLOWING JOTTINGS W ERE MADE:- 14-04-2005 RS. 11,111 20-05-2005 RS.30,00,000 10-06-2005 RS.50,00,000 27-07-2005 RS.60,00,000 ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 3 05-09-2005 RS.50,00,000 10-10-005 RS. 7,00,000 30-11-2005 RS.55,00,000 14-1-2005 RS.40,00,000 DURING THE COURSE OF SURVEY STATEMENTS OF SHRI BIMA L V RESHAMWALA, VINESH R RESHAMWALA, ASHUTOSH R RESHAMWALA AND BALKRISHNA R RESHAMWALA I.E. THE KARTA AND MEMBERS OF RESHAMWALA FAMILY WERE RECORDED U/S. 131 OF THE ACT, WHEREIN ALL OF THEM STATED THAT THE AMOUNT WRITTEN IN THE IMPOUNDE D WRITING PAD WAS RECEIVED FROM SHRI HITENDRA D PATEL IN RESPECT OF SALE OF THEIR A GRICULTURAL LAND AT BHESTAN AND THE TOTAL SALE CONSIDERATION OF WHICH WAS RS.3,00,11,11 1/-. DURING THE COURSE OF STATEMENT THEY ADMITTED THAT THE SAID TRANSACTION I S NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND ADMITTED THE SALE RECEIPT OF RS.3,00 ,11,111/- IN RESPECT OF ABOVE AGRICULTURAL LAND. THE ASSESSING OFFICER IN VIEW OF THE ABOVE FACTS BIFURCATED THE TOTAL SALE PROCEEDS AMONG 14 CO-OWNERS OF THE LAND AND CO LLECTED CHEQUES FOR ADVANCE TAX FROM THEM AS UNDER:- SR NO. NAME SALES PROCEEDS OF LAND CHEQUE OF ADVANCE TAX 1. SHRI SAKERIAL C RESHAMWALA (HUF) 37,50,000 6,2 5,000 2. MADHUSUDAN C RESHAMWALA (HUF) 37,50,000 6,25,00 0 3. MOHANLAL J RESHAMWALA 37,50,000 6,25,000 4. RAMESHCHANDRA J RESHAMWALA 37,50,000 6,25,000 5. ARVIND C RESHAMWALA (HUF) 25,00,000 4,16,670 6. INDRAVADAN M RESHAMWALA (HUF) 12,50,000 2,08,33 0 7. BHUPENDRA M RESHAMWALA (HUF) 12,50,000 2,08,330 8. KAUSHIK S RESHAMWALA 12,50,000 2,08,330 9. ASHWIN M RESHAMWALA (HUF) 12,50,000 2,08,330 10. NARESH N RESHAMWALA 15,00,000 2,50,000 11. HASMUKHLAL D RESHAMWALA (HUF) 15,00,000 2,50,0 00 12. RASIKLAL D RESHAMWALA (HUF) 15,00,000 2,50,000 13. GOVARDHAN D RESHWAMWALA (HUF) 15,00,000 2,50,0 00 14. JASWANTLAL D RESHAMWALA (HUF) 15,00,000 2,50,0 00 TOTAL 3,00,00,000 49,99,990 4. POST SURVEY PROCEEDINGS, THE REVENUE SUMMONED TH E PURCHASER, SHRI HITENDRA D PATEL AND RECORDED HIS STATEMENT U/S.131 OF THE ACT, WHEREIN HE ADMITTED TO HAVE PURCHASED THE AGRICULTURAL LAND FOR TOTAL C ONSIDERATION OF RS.3 CRORE FROM RESHAMWALA FAMILY, AND THEY OFFERED THE ABOVE SALE CONSIDERATION IN THEIR ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 4 RESPECTIVE RETURN OF INCOME QUA THEIR INDIVIDUAL SH ARES. WHILE FRAMING THE ASSESSMENT THE ASSESSING OFFICER ESTIMATED THE VALU E OF LAND @ 700 PER SQ.MT AND WORKED OUT CAPITAL GAINS, ACCORDINGLY AT RS.21,24,4 72/-, AS AGAINST THE CAPITAL GAIN DECLARED BY THE ASSESSEE AT RS.7,48,128/- AND THERE BY MADE ADDITION OF RS.19,76,374/-. THE AO WHILE COMPUTING THIS CAPITAL GAIN ADOPTED THE FAIR MARKET VALUE OF THE LAND AT RS.700/- PER SQ.MT. AS AGAINST THE STAMP VALUATION FIXED BY THE REGISTRATION AUTHORITY AT RS.400/- PER SQ.MT. THE ASSESSEE DISCLOSED THE VALUE IN TERMS OF PER SQ.MT. AT RS.483/- PER SQ.MT. THE ASSE SSING OFFICER ALSO ADOPTED THE COST OF ACQUISITION OF THE ABOVE SAID AGRICULTURAL LAND AT RS.25 PER SQ.MT. AS ON 01- 04-1981 FOR COMPUTING CAPITAL GAINS, AS AGAINST THE VALUE ADOPTED BY THE ASSESSEE AT RS.60/- PER SQ.MT. AS CERTIFIED BY REGISTER APPR OVED VALUER OF THE DEPARTMENT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 5. THE CIT(A) ENHANCED THE SALE CONSIDERATION BY AD OPTING FAIR MARKET VALUE AT RS.5,000/- SQ.MT. FOR THIS, CIT(A) HAS RECORDED THE FOLLOWING FINDINGS IN PAGES 8, 9 AND 10 :- IN THE PRESENT CASE, SINCE THE CASH RECEIPTS AS NO TED IN THE LOOSE PAPER WERE FOUND AND IMPOUNDED IN SURVEY, THE APPELLANT CLAIME D TO HAVE NOT RECEIVED ANY FURTHER PAYMENT EITHER IN CASH OR IN CHEQUES AN D OFFERED THE CAPITAL GAIN ONLY ON THE AMOUNT NOTED IN THE LOOSE PAPER. THIS I S NOT ACCEPTABLE SINCE, THE APPELLANT HAS NOT EXECUTED THE SALES AGREEMENT IMME DIATELY THEREAFTER, BUT HAS ENTERED INTO A REGISTERED SALES DOCUMENT MUCH L ATER ON 2-2-2007 I.E. AFTER A PERIOD OF MORE THAN 1 YEAR WHICH CLEARLY SIGNIFIE S THAT THE APPELLANT MUST HAVE RECEIVED THE PAYMENT EVEN AFTER DECEMBER 2005 TILL FEBRUARY 2007 BECAUSE IF THE PURCHASER HAD MADE THE ENTIRE PAYMEN T IN DECEMBER 2005, HE WOULD NOT HAVE WAITED TO ENTER INTO A REGISTERED SA LES DEED FOR A PERIOD OF MORE THAN 1 YEAR. THIS FACT CLEARLY SIGNIFIES THAT THE SALES CONSIDERATION AS SHOWN BY THE APPELLANT IS NOT CORRECT AND JUST BECA USE THE UNACCOUNTED CASH PORTION OF THE SALES CONSIDERATION WAS FOUND AND IM POUNDED DURING SURVEY, THE APPELLANT HAS THEREAFTER, NOT SHOWN ANY FURTHER RECEIPT AND THEREBY EVADED THE BALANCE PORTION WHICH IS OUGHT TO HAVE B EEN RECEIVED DURING THE PERIOD BETWEEN DECEMBER 2005 TO FEBRUARY 2007, WHEN THE SALES DEED WAS REGISTERED. HENCE, THE SALES CONSIDERATION HAS TO BE ESTIMATED IN THE PRESENT CASE AS PER SECTION 45. IT IS PERTINENT TO NOTE THAT AS ALREADY DISCUSSED ABOVE, THE NEW JANTRY AS MADE APPLICABLE FROM APRIL 2008 WAS WORKE D OUT BY THE STATE GOVERNMENT ON THE BASIS OF THE MARKET RATES PREVAIL ING DURING THE PERIOD 2005 AND 2006. ANOTHER IMPORTANT FACT TO BE NOTED I S THAT THE OLD JANTRY WAS PREVAILING SINCE 1999 AND WAS NOT REVISED SINCE LON G AND HENCE, IT WAS VERY MUCH NECESSARY TO BRING THE JANTRY AT PAR WITH THE PREVAILING MARKET RATES IN ORDER TO ELIMINATE LEAKAGES OF REVENUE. THE OLD JAN TRY RATE OF THE LAND UNDER ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 5 CONSIDERATION WAS RS.400/- WHEREAS THE NEW JANTRY R ATE IS RS.5,000/-. THUS, THERE IS A HUGE DIFFERENCE BETWEEN THE OLD AND NEW JANTRY RATES, WHICH AMPLY EVIDENCES THAT THE PREVAILING MARKET RATES WERE VER Y MUCH HIGHER AS COMPARED TO THE OLD JANTRY RATES. THEREFORE, THE SA LES CONSIDERATION AS SHOWN BY THE APPELLANT AS PER THE OLD JANTRY RATES, IS NO T AT ALL ACCEPTABLE. FURTHER, IT IS A MATTER OF COMMON SENSE THAT PROPERTY PRICES WO ULD NOT INCREASE ABNORMALLY FROM RS.400/- PER SQ. MT. TO RS.5,000/- PER SQ. MT. IN JUST A FEW MONTHS, BUT IN FACT THIS SUGGESTS THAT THE ACTUAL M ARKET RATES WERE MUCH HIGHER THAN THE OLD JANTRY PREVAILING DURING 2006 I .E. DURING THE PERIOD WHEN THE DEAL UNDER CONSIDERATION WAS FINALIZED. IN THE STATE OF GUJARAT, STAMP DUTY IS RECOVERED AS PER THE PROVISIONS OF SECTION 32(A) OF THE BOMBAY STAMP ACT, 1958. THE FIRST JANTRY WAS PREPARE IN 1984 AND THEREAFTER IN 1999. THE JANTRY MADE APPLICABLE IN 2008 WAS BASED ON THE MARKET SITUATIO N DURING THE PERIOD 2005- 2006 I.E. DURING THE PERIOD WHEN THE SUBJECT DEAL H AD TAKEN PLACE. THEREFORE, THE REVISED JANTRY RATE OF RS.5,000/- PER SQ. MTR. IS THE PERFECT BASIS FOR DETERMINING THE MARKET VALUE OF THE SUBJECT LAND IN THE YEAR 2006 AND THE RATE OF RS.700/- PER SQ. MTR. AS ADOPTED BY THE AO IS RE JECTED AS BEING WITHOUT ANY BASIS. MOREOVER, IT IS SEEN THAT IN THE VALUATION REPORT I NSTANCES OF SALE OF AGRICULTURAL LAND HAS BEEN GIVEN BY THE REGISTERED VALUER BETWEE N RS.15 TO 32 AND THE OTHER RATES AS GIVEN BY THE VALUER ARE NOT COMPARAB LE WITH THE ASSESSEES CASE SINCE, THEY ARE FOR NA LAND AND NOT AGRICULTUR AL LAND. THUS, WHEN THE COMPARABLE INSTANCES ARE BETWEEN RS.15 TO RS.32 PER SQ. MTR. THE RATE OF RS.60 PER SQR. MTR. AS ADOPTED BY THE VALUER IS INC ORRECT AND WITHOUT ANY BASIS AND THEREFORE, THE SAME CANNOT BE ACCEPTED. A CCORDINGLY, THE COST OF ACQUISITION OF THE LAND AS ON 1-4-1981 IS TAKEN AT RS.25 PER SQ. MTR. AS DETERMINED BY THE A.O. AS REGARDS THE AREA OF THE LAND SOLD I AGREE WITH T HE APPELLANT THAT WHEN SUDA HAS ACQUIRED 26610 SQ. MTS. OF LAND OUT OF THE TOTAL 88,700 SQ. MTRS., THE SALES CONSIDERATION CAN BE COMPUTED ONLY FOR TH E BALANCE LAND OF ONLY 62090 SQ. MTRS. FURTHER, SINCE, THE APPELLANT HAD A CQUIRED 88700 SQ. MTRS. ORIGINALLY, OUT OF WHICH 26,610 SQ. MTRS. HAS BEEN LOST WITHOUT ANY CONSIDERATION, HE IS ENTITLED TO CLAIM THE COST OF ACQUISITION FOR THE ENTIRE 88700 SQ. MTRS. OF LAND. HENCE, THE CAPITAL GAIN IN THE CASE OF THE APPELLAN T CONSIDERING THE SALES AREA AT 62090 SQ. MTRS., SALES PRICE AT RS.5,000/- PER S Q. MTR. AND FMV AS ON 1-4- 1981 AT RS.25 PER SQ. MT. FOR 88,700 SQ. MTRS. WOUL D WORK OUT AS FOLLOWS. PARTICULARS AMOUNT (RS) SALES PRICE (62,090 SQ. MTRS. X RS.5,000) LESS: INDEXED COST OF ACQUISITION (88,700 SQ. MTRS. X 25 X 497 / 100) TOTAL CAPITAL GAINS OF THE CO-OWNERS 31,04,50,000 1,10,20,975 29.94.29,025 1,24,56,247/- ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 6 APPELLANTS SHARE AT 4.16% OF RS.29,94,29,025/- LESS: SHOWN IN THE RETURN OF INCOME ADDITIONS 1,48,128/- 1,23,08,119/- IN THE RESULT THE APPEAL IS PARTLY ALLOWED AND INCO ME ENHANCED AS ABOVE. AGGRIEVED, THE ASSESSEE CAME IN SECOND APPEAL BEFOR E US. 6. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE , SHRI MANISH J SHAH STATED THAT THE ABOVE APPEAL IS COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OTHER CO-OWNERS IN GROUP CASES IN ITA NO.3374-3380/AHD/2009 FOR ASSESSMENT YEAR 2006-07 DATED 23-04-2010, WHEREIN EXACTLY ON SIMILA R FACTS, THE TRIBUNAL HAS HELD IN PARA-6-12 AS UNDER:- 6. THE FIRST GRIEVANCE OF THE ASSESSEE IS AGAINST THE ENHANCEMENT OF VALUE OF LAND FROM RS.700/- PER SQ. MT. TO RS.5,000 /- SQ. MT. BY THE CIT(A) AS AGAINST THE FAIR MARKET VALUE ADOPTED BY THE ASSESS EE AT RS.483/- PER SQ. MT. (THE CIRCLE RATES FIXED BY STAMP DUTY REGISTRATION AUTHORITY ARE AT RS.400/- PER SQ.MT.) SECOND, GRIEVANCE OF THE ASSESSEE IS THAT T HE AGRICULTURAL LAND WAS ANCESTRAL AGRICULTURAL LAND AND ACCORDINGLY FAIR MA RKET VALUE AS ON 01-04-1981 FOR COMPUTATION OF CAPITAL GAIN I.E. THE COST OF AC QUISITION, IS TO BE DETERMINED ACCORDING TO THE ASSESSEE AS PER VALUATION REPORT O BTAINED FROM APPROVED VALUER, SHRI P. K. DESAI, WHO VALUED THE LAND AS ON 01-04-1981 AT RS.60 PER SQ. MT. AS AGAINST THIS, THE ASSESSING OFFICER DETE RMINED THE FAIR MARKET VALUE AT RS.25/- PER SQ. MT. ON THE GROUND THAT THE COMPA RABLE SALE INSTANCE GIVEN BY THE REGISTERED VALUER RANGES FROM RS.15/- TO RS. 32 PER SQ. MT. 7. WE FIND ONE MORE INTERESTING FACT FROM THE ORDER S OF THE LOWER1 AUTHORITIES AS WELL AS FROM THE SUBMISSIONS OF THE ASSESSEES COUNSEL AND LD. CIT-DR THAT THE TOTAL CONSIDERATION OF RS.3 CRORES WAS RECEIVED BY THE CO- OWNERS UP TO DEC.05 BUT THE SALE DEEDS WERE REGIST ERED IN FEB07 AND THE ASSESSEE HAD TO RECEIVED FURTHER AMOUNT FROM THE BU YERS AMOUNTING TO RS.8 LAKH, WHICH WAS BALANCE, TO BE RECEIVED AT THE TIME OF REGISTRATION OF SALE DEED. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US ST ATED THAT THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE FACT THAT THE DEAL WAS ENTERED INTO IN APRIL05 FROM WHERE THE PAYMENT STARTED RECEIVED FR OM THE BUYER BY THE CO- OWNERS. OUT OF 14 CO-OWNERS 3 CO-OWNERS, NAMELY R AMKRISHNA HASMUKHBHAI RESHAMWALA, SAKERLAL C RESHAMWALA AND A SHWINBHAI M RESHAMWALA EXPIRED IN THE INTERVENING PERIOD ON 15- 02-2006, 11-03-2006 AND 16-08-2006 RESPECTIVELY. ACCORDINGLY, THE FULL AND FINAL CONSIDERATION WAS RECEIVED AND REGISTERED SALE DEED WAS EXECUTED IN F EB07. ACCORDING TO LD. COUNSEL, THE PAYMENT SO RECEIVED IS AMOUNTING TO RS .2,92,11,111/- AS NOTED IN THE IMPOUNDED WRITING PAD UP TO DEC05 AND THE B ALANCE RS.8 LAKH WAS YET TO BE RECEIVED AND FINALLY IT WAS RECEIVED AT THE T IME OF REGISTRATION OF SALE AGREEMENT IN MAR06. THE LD. CIT-DR STATED THAT THE CIT(A) HAS RIGHTLY HELD THAT THE ISSUE UNDER CONSIDERATION IS NOT DETERMINA TION OF SALES CONSIDERATION ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 7 U/S.50C OF THE ACT BUT THE SALE VALUE IS BEING DETE RMINED U/S.45 OF THE ACT SINCE IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAVE NOT ENTERED INTO ANY REGISTERED SALE DEED AND THEREFORE, THE PROVISIONS OF SECTION 50C ARE NOT APPLICABLE. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSEE HAD RECEIVED THE FULL SALES CONSIDERATION OF RS.3,00,11,111/- FOR THE SAID AGRICULTURAL LAND UP TO MARCH06 AND HAD ALSO GIVEN THE POSSESSION OF THE SAID AGRICULTURAL LAND IN THE YEAR UNDER CONSIDERAT ION ITSELF BUT THE REGISTRATION OF THE SALE DEED WAS DONE LATER ON 02-02-2007 ON AC COUNT OF DEATH OF 3 CO- OWNERS. THIS IS NOT A CASE WHERE NO SALE DEED HAS B EEN REGISTERED BUT IN THIS CASE, THE REGISTRATION OF THE SALE DEED GOT DELAYED ON ACCOUNT OF DEATH OF CO- OWNERS AND THEREFORE, THE PROVISIONS OF SECTION 50C ARE CLEARLY APPLICABLE. 8. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND THAT THE CIRCLE RATES FIXED BY STAMP DUTY AUTHORITIES OF LAND AT BH ESTAN FOR FINANCIAL YEAR 2005-06 RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERA TION WAS FIXED AT RS.400/- PER SQ.MT AND THE SALE CONSIDERATION RECEI VED BY THE ASSESSEE IS @ RS.483/- PER SQ.MT. WE FIND THAT THESE CO-OWNERS HA VE SOLD THE LAND AND RECEIVED PAYMENT OF RS.2,92,11,111/- UP TO 14-12-20 05 AND DUE TO DEATH OF CO-OWNERS IN THE INTERVENING PERIOD, THE SALE DEED COULD NOT BE REGISTERED BUT THE CLAIM OF THE ASSESSEE IS THAT THE BALANCE RS.8 LAKH WAS RECEIVED AS ON 31 ST MARCH, 2006. FINALLY, THE SALE DEED WAS REGISTERE D IN JAN. & FEB07 THROUGH TWO SALE DEEDS REGISTERED AND THE CONSIDERA TION OF THE SALE DEEDS WAS AMOUNTING TO RS.3,00,11,111/-. WE FIND THAT TH E REVENUE COULD NOT BRING ANY EVIDENCE THAT THE ENTIRE CONSIDERATION WAS NOT PAID ON OR BEFORE 31-03- 2006 AND POSSESSION OF LAND WAS NOT HANDED OVER BY THESE CO-OWNERS TO THE SELLER. EVEN OTHERWISE, WE ACCEPT THE CLAIM OF THE REVENUE THAT THE POSSESSION OF THIS LAND AND THE BALANCE PAYMENT OF RS.8 LAKH WAS DELIVERED AT THE TIME OF REGISTRATION OF SALE DEED IN JAN. & FEB07, WHEN THE SALE DEEDS WERE REGISTERED, THE REVENUE CANNOT ASSESS THE CAPI TAL GAIN IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2006-07. HOWEVER, THE VITAL ISSUE BEFORE US IS WHETHER IN TH E CASE OF SALE THROUGH REGISTERED SALE AGREEMENT, THE CAPITAL GAIN IS TO B E COMPUTED IN TERMS OF SEC.50C OF THE ACT OR NOT. WE ARE OF THE VIEW THAT WHEN THE ASSET IS TRANSFERRED IN TERMS OF SEC.53A OF THE TRANSFER OF PROPERTY ACT, 1882, THE PROVISIONS OF SEC.50C OF THE ACT WILL APPLY TO THE TRANSACTION. THE RELEVANT PROVISION OF SEC. 2(47) OF THE ACT READS AS UNDER:- 2(47) TRANSFER, IN RELATION TO A CAPITAL ASSET, INC LUDES, - (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANC E OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPE RTY ACT, 1882 (4 OF 1882); OR NOW FOR THE SAKE OF CLARITY, THE PROVISION OF SEC.5 0C OF THE ACT AS INTRODUCED BY SECTION 24 OF THE FINANCE ACT, 2002 WITH EFFECT FROM 1-4-2003, FOR AND FROM ASSESSMENT YEAR 2003-04, NAMELY:- S.50C. SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES, - (1 WHERE THE CONSIDERATION RECEIVED O ACCRUING AS A RE SULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 8 VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STA TE GOVERNMENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE ST AMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL, FOR THE PURPOSES OF SECT ION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACC RUING AS A RESULT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (1), WHERE (A) THE ASSESSEE CLAIMED BEFORE ANY ASSESSING OFFIC ER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DAT E OF TRANSFER; (B) THE VALUE SO ADOPTED OR ASSESSED BY THE STAMP V ALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT, THE ASSESSING OFFICER MAY REFER THE VALUATION OF TH E CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS M ADE, THE PROVISIONS OF SUB-SECTIONS (2), (30, (4), (5) AND (6) OF SECTION 16A, CLAUSE (I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION 23A, SU B-SECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SECTION 37 OF THE WEAL TH-TAX ACT, 1957 (27 OF 1957), SHALL, WITH NECESSARY MODIFICATIONS, APPLY I N RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY TH E ASSESSING OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THAT ACT. EXPLANATION FOR THE PURPOSES OF THIS SECTION VAL UATION OFFICER SHALL HAVE THE SAME MEANING AS IN CLAUSE OF SECTION 2 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957). (3) SUBJECT TO THE PROVISIONS CONTAINED IN SUB-SECT ION (2), WHERE THE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY REFERRED TO IN SUB-SE CTION (1), THE VALUE SO ADOPTED OR ASSESSED BY SUCH AUTHORITY SHALL BE TAKE N AS THE FULL VALUE OF THE CONSIDERATION RECEIVED ON ACCRUING AS A RESULT OF T HE TRANSFER. 9. THE RELEVANT PROVISION OF SECTION 50C OF THE ACT WAS EXPLAINED AND ELABORATED IN THE FOLLOWING PORTION OF THE DEPARTME NTAL CIRCULAR NO.8 OF 2002 DATED 27-08-2002, AS UNDER:- 37 . COMPUTATION OF CAPITAL GAINS IN REAL ESTATE TRANS ACTIONS, - 37.1 THE FINANCE ACT, 2002 HAS INSERTED A NEW SECTION 50C IN THE INCOME-TAX ACT TO MAKE A SPECIAL PROVISION FOR DETERMINING THE FULL V ALUE OF CONSIDERATION IN CASES OF TRANSFER OF IMMOVABLE PROPERTY. 37.2 IT PROVIDES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUI LDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STA TE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 9 ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION, AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY UND ER SECTION 48 OF THE INCOME-TAX ACT. 37.3 IT IS FURTHER PROVIDED THAT WHERE THE ASSESSEE CLA IMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER, AND HE HAS NOT DISPUTED THE VALUE SO ADOPTED OR ASSESSED IN ANY APPEAL OR REVISION OR REFERENCE BEFORE ANY AUTHORITY OR COURT, THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE RELEVANT ASSET TO A VALUATION OFFICER IN ACCORDANCE WITH SECTION 55A OF THE INCOME-TAX ACT. IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS LESS THAN THE VALUE ADOPTED FOR STAMP DUTY PURPOSES , THE ASSESSING OFFICER MAY TAKE SUCH FAIR MARKET VALU9E TO BE THE FULL VAL UE OF CONSIDERATION. HOWEVER, IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY P URPOSES THE ASSESSING OFFICER SHALL NOT ADOPTED SUCH FAIR MARKET VALUE AN D SHALL TAKE THE FULL VALUE OF CONSIDERATION TO BE THE VALUE ADOPTED OR ASSESSED F OR STAMP DUTY PURPOSES. 37,4 THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2003, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2003-04 AND SUBSEQUENT YEARS [SECTION 4]. 10. WE FURTHER FIND THAT THIS PROVISION WAS ELABORA TED IN THE NOTES ON CLAUSES AND MEMO. EXPLAINING PROVISIONS IN THE FINA NCE BILL, 2002 AS UNDER:- NOTES ON CLAUSES:- CLAUSE 24 SEEKS TO INSERT A NEW SECTION 50C IN THE INCOME-TAX ACT TO PROVIDE FOR A SPECIAL PROVISION FOR FULL VALUE OF CONSIDERA TION IN CERTAIN CASES. THE PROPOSED SUB-SECTION (1) OF THE SAID SECTION SE EKS TO PROVIDE THAT WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STA TE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. THE PROPOSED SUB-SECTION (2) OF THE SAID SECTION SE EKS TO PROVIDE THAT WHERE THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER TH AT THE VALUE ADOPTED OR ASSESSED BY THE AUTHORITY UNDER SUB-SECTION (1) EXC EEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER AND THE VALUE SO ADOPTED OR ASSESSED BY THE AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BE FORE ANY OTHER AUTHORITY, COURT OR A HIGH COURT, THE ASSESSING OFFICER MAY RE FER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFICER, AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUB-SECTIONS (2), (3), (4), (5) A ND (6) OF SECTION 16A, CLAUSE (I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION 23A, SUB-SECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SEC TION 37 OF THE WEALTH-TAX ACT, 1957, SHALL, WITH THE NECESSARY MODIFICATIONS, APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESSING ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 10 OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THA T ACT. THE VALUATION OFFICER SHALL BE THE VALUATION OFFICER AS DEFINED IN CLAUSE OF SECTION OF THE WEALTH- TAX ACT, 1957. THE PROPOSED SUB-SECTION (3) PROVIDES THAT WHERE T HE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE AUTHORITY REFERRED TO IN SUB-SECTION (1), THE VALUE SO ADOPTE D OR ASSESSED BY THE AUTHORITY SHALL BE TAKEN AS THE FULL VALUE OF THE C ONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2003, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2003-2004 AND SUBSEQUENT YEARS. MEMORANDUM EXPLAINING PROVISIONS OF SECTION 50C IN THE FINANCE BILL, 2002, AS UNDER:- THE BILL PROPOSES TO INSERT A NEW SECTION 50C IN THE INCOME-TAX ACT TO MAKE A SPECIAL PROVISION FOR DETERMINING THE FULL VALUE OF CONSIDERATION IN CASES OF TRANSFER OF IMMOVABLE PROPERTY. IT IS PROPOSED TO PROVIDE THAT WHERE THE CONSIDERAT ION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A SATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION, AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY UND ER SECTION 48 OF THE INCOME-TAX ACT. IT IS FURTHER PROPOSED TO PROVIDE THAT WHERE THE AS CLAIMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE ATE OF TRANSFER, AND HE H AS NOT DISPUTE THE VALUE SO ADOPTED OR ASSESSED IN ANY APPEAL OR REVISION OR RE FERENCE BEFORE ANY AUTHORITY OR COURT, THE ASSESSING OFFICER MA REFER THE VALUATION OF THE RELEVANT ASSET TO A VALUATION OFFICER IN ACCORDANCE WITH SEC TION 55A OF THE INCOME-TAX ACT. IF THE FAIR MARKET VALUE TO BE THE FULL VALUE OF CONSIDERATION. HOWEVER, IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION O FFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES, THE ASSESSING OFFICER SHALL NOT ADOPT SUCH FAIR MARKET VALUE AND WILL TAK E THE FULL VALUE OF CONSIDERATION TO BE THE VALUE ADOPTED OR ASSESSED F OR STAMP DUTY PURPOSES. IT IS ALSO PROPOSED TO PROVIDE THAT IF THE VALUE AD OPTED OR ASSESSED FOR STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL, REVISION OR REFERENCE, THE STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL, REVISION OR REFE RENCE, THE ASSESSMENT MADE SHALL BE AMENDED TO RE-COMPUTE THE CAPITAL GAI NS BY TAKING THE REVISED VALUE AS THE FULL VALUE OF CONSIDERATION. THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL, 2003, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2003-2004 AND SUBSEQUENT YEARS. [CLAUSES 24 AND 59] ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 11 11. IN VIEW OF THE ABOVE PROVISION AND EXPLAINING T HE PROVISION, WE ARE OF THE VIEW THAT THE LAW U/S. 50C HAD BEEN PROVIDED AD EQUATE PROTECTION TO THE TAX-PAYERS AGAINST ADOPTION OF ARBITRARY VALUES FOR THE COMPUTATION OF CAPITAL GAINS AND THE FOLLOWING PRECAUTIONARY ARE PROVIDED: - (I) THE VALUE WHICH IS CONSIDERED AS THE PROPER VAL UE OF THE PROPERTY AS FIXED BY THE AUTHORITY FOR REGISTRATION FOR STAMP DUTY PU RPOSES IS PRESUMED TO BE THE FAIR MARKET VALUE FOR THE PURPOSES OF COMPUTATION O F CAPITAL GAINS ON THE SALE OF PROPERTY. (II) IT IS OPEN TO THE TAXPAYER TO PLEAD THAT SUCH STAMP VALUE IS ABNORMAL AND CONTEST THE SAME IN APPEAL UNDER THE STAMP LAW REQU IRING ADOPTION OF REDUCED VALUE. IF SUCH VALUE IS REDUCED IN APPEAL UNDER THE PROVISIONS OF THE RELEVANT STAMP LAW, SUCH REDUCED VALUE WOULD ALONE BE ADOPTE D. (III) WHERE SUCH STAMP VALUE IS NOT DISPUTED, IT IS OPEN TO THE ASSESSEE TO REQUIRE THE ASSESSING OFFICER TO REFER THE VALUATIO N TO THE VALUATION OFFICER, WHO SHALL FIX THE VALUATION BY ADOPTION OF THE PROC EDURE PRESCRIBED UNDER SECTION 16A OF THE WEALTH-TAX ACT. IT IS SUCH VALUE , WHICH WILL BE ADOPTED BY THE ASSESSING OFFICER. 12. WE FURTHER FIND FROM THE MEMORANDUM EXPLAINING THE PROVISION OF SECTION 50C IN THE FINANCE BILL, 2002, WHICH CLEARL Y STATES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING A S A RESULT OF TRANSFER OF LAND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADO PTED OR ASSESSED BY ANY AUTHORITY OF A SATE GOVT. FOR THE PURPOSES OF PAYME NT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION AND CAPITAL GAINS S HALL BE COMPUTED ACCORDINGLY U/S.48 OF THE ACT. IN CASE THE VALUE ADOPTED OR AS SESSED FOR STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL, REVISION OR REFE RENCE, THE ASSESSMENT MADE SHALL BE AMENDED TO RE-COMPUTE THE CAPITAL GAI NS BY TAKING THE REVISED VALUE AS THE FULL VALUE OF CONSIDERATION. ACCORDI NGLY, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 50C ARE APPLICABLE ONLY F OR THE COMPUTATION OF CAPITAL GAINS IN REAL ESTATE TRANSACTION. WE FIND FROM SECT ION 50C OF THE ACT THAT IT CREATES A LEGAL FICTION THEREBY APPARENT CONSIDERAT ION IS SUBSTITUTED BY VALUATION DONE BY STAMP VALUATION AUTHORITI ES AND CAPITAL GAINS ARE CALCULATED ACCORDINGLY. LEGAL FICTION CANNOT BE EXT ENDED ANY FURTHER AND HAS TO BE LIMITED TO THE AREA FOR WHICH IT IS CREATED. HON'BLE ANDHRA PRADESH HIGH COURT IN ADDL. CIT V. DURGAMMA P. (1987) 167 1TR 77 6 (AP) HELD THAT IT IS NOT POSSIBLE TO EXTEND THE FICTION BEYOND THE FIELD LEG ITIMATELY INTENDED BY THE STATUTE. THE HON'BLE COURT WAS DEALING WITH THE PRO VISIONS OF SEC. 171(1) OF THE I.T. ACT IN THE CONTEXT OF WHICH IT WAS HELD TH AT JOINT FAMILY SHALL BE DEEMED TO CONTINUE FOR THE LIMITED PURPOSE OF ASSESSING CA SES OF JOINT FAMILIES WHICH HAVE BEEN HITHERTO ASSESSED AS SUCH. IT IS NOT POSS IBLE TO EXTEND THAT FICTION TO OTHER CASES. SIMILAR VIEW WAS TAKEN BY THE HON'B LE KERLA HIGH COURT IN CIT V. KAR VALVES LTD. (1987) 168 ITR 416 (KER.) WHER EIN IT IS HELD THAT LEGAL FICTION IS LIMITED TO THE PURPOSE FOR WHICH THEY AR E CREATED AND COULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FRAME, HON'BLE KERA LA HIGH COURT WAS ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 12 DEALING WITH THE CASE WHERE ASSESSEE SOUGHT TO TAKE ADVANTAGE OF SEC.41(2) BY SUBMITTING THAT IF LIABILITIES ARE NOT LIQUID ATED AND OUTSTANDING ARE NOT COLLECTED, THEN BUSINESS COULD BE DEEM ED TO CONTINUE. HON'BLE ALLAHABAD HIGH COURT IN CONTROLLER OF ESTATE D UTY V. KRISHNA KUMAR DEVI (1988) 173 ITR 561 (ALL) HELD THAT IN INTERPRETING THE LEGAL FICTION THE COURT SHOULD ASCERTAIN THE PURPOSE FOR WHICH IT WAS CREAT ED 2ND AFTER DOING SO ASSUME ALL FACTS WHICH ARE LOGICAL TO GIVE EFFECT T O THE FICTION, HON'BLE SUPREME COURT IN CIT V. MOTHER INDIA REFRIGERATION PVT. LTD. (1985) 155 ITR 711 (SC) HELD THAT LEGAL FICTIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THEY MUST BE LIMITED TO THAT PURPOSE AND SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. IN CIT V, BHAR ANI PICTURES (1981) 129 ITR 244 (MAD,) IT IS HELD THAT LEGAL FICTIONS ARE FOR A DEFINITE PURPOSE AND ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED A ND SHOULD NOT BE EXTENDED BEYOND ITS LEGITIMATE FIELD. THE STATUTORY FICTI ON INTRODUCED IN ONE ENACTMENT CANNOT BE INCORPORATED IN ANOTHER ENACTMENT. THE PO INT THAT LEGAL FICTION CANNOT BE EXTENDED TO A NEW FIELD WAS HIGHLIGHTED B Y HON'BLE MADRAS HIGH COURT IN CIT V. RAJAM T.S, (19SS) 125 ITR 207(MA D,) WHEREIN IT IS HELD THAT SECTION 41(2) CREATES A LEGAL FICTION UNDER WHICH T HE BALANCING CHARGE IS TREATED AS BUSINESS INCOME CHARGEABLE TO TAX BUT WH EN THIS AMOUNT IS DISTRIBUTED TO SHAREHOLDERS THEN IT WOULD NOT BECOM E DEEMED DIVIDEND AND IT WOULD BE ONLY A CAPITAL RECEIPT AND NOT DISTRIBUTIO N OF ACCUMULATED PROFITS. THUS, A LEGAL FICTION WAS INVOKED IN THE HANDS OF T HE ASSESSEE COMPANY AND WAS NOT EXTENDED IN THE HANDS OF THE SHAREHOLDERS. IN THE PRESENT CASE, SECTION 50C CREATES A LEGAL FICTION FOR TAXING CAPI TAL GAINS IN THE HANDS OF THE SELLER AND THE DIFFERENCE BETWEEN APPARENT CONSIDER ATION AND VALUATION DONE BY STAMP VALUATION AUTHORITIES TO BE ASSESSED AS CA PITAL GAIN. IT IS FOR THE LEGISLATURE TO INTRODUCE LEGAL FICTION TO OVERCOME DIFFICULTY IN TAXING CERTAIN RECEIPTS OR EXPENDITURE WHICH OTHERWISE WAS NOT POS SIBLE UNDER NORMAL PROVISIONS OF THE ACT. IT IS WITH THIS PURPOSE THAT WHEN IT WAS FOUND DIFFICULT TO PREVENT TAX EVASION BY UNDERSTATING APPARENT SALE C ONSIDERATION AS COMPARED TO THE VALUATION MADE BY STAMP VALUATION AUTHORITIE S FOR THE PURPOSES OF LEVYING STAMP DUTY THEN IT WAS THOUGHT NECESSARY TO INTRODUCE SECTION 50C FOR SUBSTITUTING APPARENT SALE CONSIDERATION BY VALUATI ON DONE BY STAMP VALUATION AUTHORITIES. HON'BLE MADRAS HIGH COURT IN CGT V, R. DAMODARAN (2001) 247 ITR 698 HELD THAT STAMP VALUATION AUTHOR ITIES HAVE THEIR OWN METHOD OF EVALUATING THE PROPERTY. MERELY BECAUSE F OR THE PURPOSE OF STAMP DUTY, PROPERTY IS VALUED AT HIGHER COST, IT CANNOT BE SAID THAT ASSESSES HAS MADE MORE PAYMENT THAN WHAT IS STATED IN THE SALE D EED. WE ARE IN FULL AGREEMENT WITH THE ARGUMENTS OF THE ASSESSEE THAT S ECTION 50C IS APPLICABLE IN THE PRESENT CASE AND THIS PROVISION BEING A DEEM ING PROVISION WILL APPLY FOR DETERMINING THE FULL VALUE OF CONSIDERATION AS A RE SULT OF TRANSFER OF CAPITAL ASSETS FOR THE PURPOSES OF COMPUTATION OF CAPITAL G AINS U/S.48 OF THE ACT. WE FURTHER FIND THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE CONSIDERATION OVER AND ABOVE, WHAT HAS BEEN RECORDED IN THE SALE DEED/AGREEMENT, HAS BEEN MADE BY THE ASSESSEE AND IN THE ABSENCE OF THE SAME, NO ADDITION CAN BE MADE BY ESTIMATING AND SUBSTITUTING THE MARKET V ALUE. ACCORDINGLY, WE DELETE THE ADDITION MADE BY THE LOWER AUTHORITIES I N THESE APPEALS. 13. AS REGARDS TO THE ISSUE OF COST OF ACQUISITION TO BE ESTIMATED BY ADOPTING FAIR MARKET VALUE AS ON 01-04-1981 FOR THE PURPOSES OF COMPUTING ITA NO.3228/AHD/2009 A.Y. 2006-07 SAKARLAL C RESHAMWALA-HUS V. ACIT, CIR-7, SRT PAGE 13 THE INDEXATION VALUE, THE ASSESSING OFFICER HAS EST IMATED THE COST OF ACQUISITION AT RS.25/- PER SQ.MT. ON THE BASIS OF R EPORT OF ASSESSEES REGISTERED VALUER APPROVED BY THE DEPARTMENT, TAKIN G COMPARABLE SALE INSTANCES GIVEN BY THE VALUER, WHICH RANGED FROM RS .15/- TO RS.32/- PER SQ.MT. THE ASSESSEE HAS ADOPTED THE VALUE AT RS.60/- PER S Q.MT. ON THE BASIS OF REPORT GIVEN BY REGISTERED VALUER APPROVED BY DEPAR TMENT, WHO HAS VALUED ON THE BASIS OF MANY FACTORS AS LOCALITY, TRAFFIC JAM, FERTILITY OF LAND ETC. WE FIND THAT THE REVENUE COULD NOT SUBSTANTIATE THE VALUE A DOPTED BY THE LOWER AUTHORITIES AT RS.25/- PER SQ.MT WHICH HAS NO BASIS . THE VALUE ADOPTED BY THE ASSESSEE OF LAND AT RS.60/- PER SQ.MT. IS BASED ON A TECHNICAL REPORT OF REGISTERED VALUER APPROVED BY THE DEPARTMENT. ACCO RDINGLY, WE ACCEPT THE VALUE ADOPTED BY THE ASSESSEE FOR COMPUTATION OF CA PITAL GAINS AT RS.60/- PER SQ.MT. AND DIRECTING THE ASSESSING OFFICER TO ADOPT THIS VALUE FOR THE COMPUTATION OF CAPITAL GAINS IN THESE APPEALS. 7. THE FACTS BEING EXACTLY IDENTICAL, RESPECTFULLY FOLLOWING THE TRIBUNALS DECISION IN CO-OWNERS CASES, WE ALLOW THE APPEAL OF THE ASSE SSEE. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 19/07/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 19/07/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-IV SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD